Press Release

VIS Assigns Rating to the Proposed TFC Instrument of Saqadat Limited

Karachi, January 29, 2020: VIS Credit Rating Company Limited (VIS) has assigned preliminary instrument rating of single ‘A’ (Single A) to the proposed secured, privately placed, Term Finance Certificates (TFC) of Sadaqat Limited (SL). Previously planned long-term Islamic Certificates (Sukuk) issue has been abandoned. The medium to long-term rating of ‘A’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. Outlook on the assigned ratings is ‘Stable’. Rating will be finalized upon review of signed legal documents.

SL is one of the well-known value-added textile units operating from Faisalabad. SL is mainly involved in manufacturing and export of a wide range of home textile products and holds nearly 5% - 7% market share of annual bed ware exports. The assigned ratings take into account experience of sponsoring family in the textile industry, healthy growth in sales and profits on account of higher demand for existing made-ups and addition of new garments and knitting capacities. Being primarily an export oriented company, rupee devaluation has positively impacted profitability. The ratings also take into account adequate debt service coverage and liquidity profile, however, debt leverage has increased due to higher trade & other payables and increased utilization of debt for working capital and capex requirements despite enhanced equity base.

SL is in process of issuing TFC in place of Sukuk as an instrument of redeemable capital of up to Rs. 1.5b for a tenor of 5 years from the issue date, inclusive of grace period of 1 year. The proceeds from the issue will be utilized for the company’s expansion in garment and knitting segment by addition of new production facilities. The underlying issue will be secured by hypothecation charge on all present and future current and fixed assets (excluding land and building) of SL on an aggregate basis amounting Rs 2b. The ranking equitable mortgage over immovable properties of the company will be upgraded to pari passu charge within a period of 180 days of the issue, through a joint pari passu charge structure. The aforesaid securities will collectively have a margin of 25% over the issue amount. Although the TFC issuance will increase debt burden, the leverage indicators are projected to remain around current levels on the back of expanding equity base. Going forward, leverage indicators and margins would remain to be the important rating drivers.
VIS has an outstanding entity ratings of SL at ‘A/A-2’ (Single A/A-Two) with ‘Stable’ outlook. The previous entity ratings were announced on July 18, 2019.

For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at 021-35311861-70 (201) or email at

Javed Callea

VIS Entity Rating Criteria Corporates (May 2019)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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